Inside this Issue
- A1 - Teaming Agreement Found Unenforceable – Cyberlock Decision
- A2 - Florida Rewrites Rules on Individual Design Professional Liability
- A3 - Arbitration Award Does Not Establish Collateral Estoppel for a Non-Party
- A4 - Subcontractor’s CGL Insurance Carrier Owed No Duty to Defend Suit against Prime Contractor Where Allegations Concerned Economic Losses Claimed from Prime Contractor Construction Defects
- A5 - No Statutory Immunity for Engineer as Agent/Employee of City where Contractor Sued It for Tortious Interference with Contract and Negligence
- A6 - Terminated Contractor Cannot Sue Architect for Tortious Interference with Contract
Article 1
Teaming Agreement Found Unenforceable – Cyberlock Decision
See similar articles: Teaming Agreements
By: Andrew E. Mishkin, Robert A. Prentice – Duane Morris LLP.
Because many parties enter into teaming agreements under the assumption that they are enforceable agreements, it may be worthwhile for those parties to consider the implications of the Cyberlock decision before entering into their next teaming agreement.
A recent federal District Court decision holding a teaming agreement between two contractors unenforceable under Virginia law raises questions about the usefulness of these commonly employed agreements—and not just in Virginia.
What Are Teaming Agreements?
Teaming agreements are frequently used by government contractors that have complementary capabilities and intend to propose for work on a prime contractor–subcontractor basis. The agreements reflect the parties' intent that if the government awards a contract to the prime contractor, then the prime contractor will enter into a subcontract with the other team member, and the teaming agreement often allocates the types and amounts of work to be done by each party. One of the reasons that teaming agreements are used is that they avoid the need for the parties to negotiate a detailed subcontract agreement that they may end up not needing if their proposal is not successful. Teaming agreements sometimes include exclusivity provisions that would prevent the parties from teaming with others for the designated project.
The Cyberlock Decision
In Cyberlock Consulting, Inc. v. Information Experts, Inc., ___ F.Supp.2d ____ (2013), 2013 U.S. Dist. LEXIS 49092, 2013 WL 1395742 (1:12cv396 (JCC/TCB) April 3, 2013, the U.S. District Court for the Eastern District of Virginia granted summary judgment to Information Experts, which was resisting the enforcement of a teaming agreement by Cyberlock after the parties were unable to reach agreement on a subcontract relating to a prime contract awarded to Information Experts by the government, as contemplated in the teaming agreement. The court essentially agreed that the teaming agreement was a "mere [agreement] to agree in the future," and therefore unenforceable under Virginia law.
The court noted that, unlike an earlier teaming agreement between the same parties, the one at issue did not include a detailed description of the work to be performed by the proposed subcontractor and did not include as an exhibit the subcontract the parties would execute if the prime contract were awarded. In addition, the court noted that the teaming agreement also included a provision calling for termination of the agreement if there was a "failure of the parties to reach agreement on a subcontract after a reasonable period of good faith negotiations."
The court also disavowed an earlier decision in the case, in which it denied a motion to dismiss the breach of contract claim, in part by considering parol evidence without having expressly determined that the contract was ambiguous. In explaining the court's reasoning for disavowing the earlier ruling, the Cyberlock decision also took the unusual step of criticizing and refusing to follow an earlier Virginia Circuit Court decision that it had followed in the earlier ruling. Referring to EG & G, Inc. v. Cube Corp., 63 Va. Cir. 634, 2002 WL 31950215, at *7 (Va. Cir. Ct. Dec. 23, 2002), the court stated:
"To the extent that EG & G suggests that teaming agreements are a special arrangement to which Virginia's standard rules of contract interpretation, including the parol evidence rule, do not apply, the Court concludes that that case is incorrect and should not be followed."
In view of Cyberlock being decided by a federal District Court judge interpreting Virginia law and disapproving of a Virginia state court decision, it is unknown at this time if Cyberlock will remain the last work on enforceability of teaming agreements in Virginia.
Should Teaming Agreements Still Be Used?
Although Cyberlock was decided under Virginia law, the logic of the decision could also apply in other states. Because many parties enter into teaming agreements under the assumption that they are enforceable agreements, it may be worthwhile for those parties to consider the implications of the Cyberlock decision before entering into their next teaming agreement.
However, it is important to note that the decision does not necessarily undermine all teaming agreements; the court merely held that a teaming agreement that did not include much detail about the proposed subcontract—and that expressly provided that it would terminate if a subcontract was not agreed upon—was not sufficiently binding for the jilted subcontractor to sustain a claim seeking the award of 49 percent of the contract value. There remain many situations in which parties that have reached agreement on the major terms of a potential subcontract could enter into a teaming agreement and be reasonably confident that it will be enforceable.
Even if the parties are not far enough along in their negotiations to enter into a teaming agreement that would clearly pass muster under Cyberlock, it still might be useful to enter into such an agreement on the understanding that it is more in the nature of a letter of intent or memorandum of understanding, which are often used by parties that hope and intend to enter into definitive agreements in the future. Such situations would require a sufficient level of trust between the parties or other factors in favor of using a teaming agreement of uncertain enforceability.
A willingness to proceed in the face of the risk of unenforceability without taking steps to reduce the risk is actually something many parties undertake when they enter into negotiations for a major and complex transaction, so this is not really new territory—it is just an existing issue that has not been thought to be present in the teaming agreement context.
Increasing the Likelihood That a Teaming Agreement Will Be Enforceable
If parties wish to increase the likelihood that a teaming agreement will be enforced, there are steps that may be worthwhile to consider toward achieving that result. Examples of such steps are:
- negotiate the key terms and form of a proposed subcontract and include it as an exhibit to the teaming agreement,
- do not make the teaming agreement subject to termination in the event of a dispute about the terms of the subcontract,
- include confidentiality and exclusivity provisions that would preclude each party from going forward with the transaction without the other party,
- identify and include remedies if a subcontract is not entered into and
- choose a state other than Virginia for the applicable governing law, such as Delaware or another state favorable to enforcement.
With regard to the choice of law issue, as noted above, it appears at least possible that jurisdictions other than Virginia would apply the logic used in Cyberlock to a failed teaming arrangement. On the other hand, Delaware case law would appear to be more sympathetic to enforcement of teaming agreements. See BAE Sys. Info. & Elec. Sys. Integration v. Lockheed Martin Corp., 2009 Del. Ch. LEXIS 17, 21–22 (Del. Ch. Feb. 3, 2009). In BAE, the court refused to dismiss a claim in which the defendant argued that a memorandum of agreement functionally similar to a teaming agreement was an unenforceable agreement to agree. The BAE court did not see the absence of definitive pricing as integral, and considered the conduct of the parties (they continued to perform under the agreement for four years prior to the claim arising) in determining that there was an intent to be bound.
Planning Items for Consideration
Even if a teaming agreement is deemed enforceable, it may be of limited value if the parties reach a genuine and unexpected deadlock in final negotiations of a subcontract. As noted by the BAEcourt:
If [the parties] had tried, but failed, to come to an understanding about F-35 work, what would be [plaintiff's] claim? How would it be valued? How would it be enforced? Or, is this litigation about the allocation of real work or is simply about the "value of a chance"? [*22] This case amply demonstrates the perils and shortcomings of any arrangement that sounds like an agreement to agree.
This observation appears to emphasize the point that meaningful remedies for the breach of a plainly enforceable teaming agreement may be challenging to obtain. As a result, the parties should consider the possibility that they will fail to reach a final agreement on a subcontract after the award of a prime contract, and they may want to fashion an appropriate remedy and incorporate it into the teaming agreement.
The challenges raised in the failed teaming agreement context are significant enough to serve as a reminder that a considerable level of trust and confidence between the parties is a prerequisite to entering into negotiations for a teaming agreement. Consequently, a teaming agreement between contractors that have never worked together on a project poses a higher level of risk, no matter which jurisdiction's law will determine the agreement's enforceability.
If have any questions about this Alert, please contact Andrew E. Mishkin, Robert A. Prentice, any member of the Construction Group or the attorney in the firm with whom you are already in contact.
This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.
Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.
ANDREW E. MISHKIN
Partner
Duane Morris LLP
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Email: AEMishkin@duanemorris.com
ROBERT A. PRENTICE
Partner
Duane Morris LLP
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USA
Phone: +1 215 979 1130
Fax: +1 215 689 3814
Email: RAPrentice@duanemorris.com
Copyright 2013, ConstructionRisk, LLC
Article 2
Florida Rewrites Rules on Individual Design Professional Liability
See similar articles: Florida Statute | Individual Professional Immunity | Limitation of Liability
By: J. Keith Ramsey and Monte S. Starr, Holland & Knight LLP
Ever since Moransais v. Heathman, 744 So. 2d 973 (Fla. 1999), Florida courts have recognized that individual professionals could be held liable to third parties for their negligence in the performance of a contract entered into by their employer. In Witt v. La Gorce Country Club Inc., 35 So. 3d 1033 (Fla. 3d DCA 2010), the Third District Court of Appeal expanded that liability to rule that as a matter of law, limitation of liability provisions in professional services contracts were not enforceable to insulate individual professionals from liability.
That was the case until April 24, 2013, when Governor Rick Scott approved Senate Bill 286. The bill will effectively abrogate the holding of Witt and permit business entities providing professional services to limit by contract the liability of their individual employees or agents. Under the newly created Florida Statute 558.0035, which is effective July 1, 2013, an individual design professional (identified in the new statute as an architect, interior designer, landscape architect, engineer, surveyor or geologist) can be protected from individual liability for negligence under each of the following circumstances:
- the contract is made between the business entity and a claimant or with another entity for the provision of professional services to the claimant
- the contract does not name as a party to the contract the individual employee or agent who will perform the professional services
- the contract includes a prominent statement, in uppercase font that is at least five point sizes larger than the rest of the text, that, pursuant to this section, an individual employee or agent may not be held individually liable for negligence
- the business entity maintains any professional liability insurance required under the contract
- any damages are solely economic in nature and the damages do not extend to personal injuries or property not subject to the contract
Other Statutes to be Amended
Several other statutes addressing design professional liability will also be amended to include the proviso, "Except as provided in s. 558.0035." Those statutes are F.S. 471.023 (governing the certification of engineering firms); F.S. 472.021(governing the certification of land surveyors); F.S. 481.219 (governing the certification of architecture firms); F.S. 481.319 (governing the certification of landscape architecture firms); and F.S. 492.111 (governing the certification of professional geology firms).
The effect of this new legislation is that, under the plain language of the statute, if a professional services contract complies with the newly enacted statutory requirements, those contracting with design professional entities will not be able to hold the individual professionals liable for their negligence. Moreover, under the language of subsection (a), the limitation of liability may extend to claims brought by third parties if the underlying contract was for the provision of professional services to that third party.
Implications for Attorneys
Those attorneys with design professional clients need to familiarize themselves with the new law as their clients will no doubt be asking that limitation of liability provisions which conform to the statute be drafted for their contracts. Practitioners should caution their clients, however, that it will be a while before courts have the opportunity to apply the new law and its effect.
Therefore, in the interim, there are many issues and questions as to the limits of its applicability that an attorney may need to advise its clients of. For example, the law only provides for individual employee immunity from liability. It does not provide for immunity to the design professional firm for that employee's negligent acts. Moreover, general partner liability principles dictate that individual partners can still be liable for the acts of their employees or even of their other partners. Finally, it is questionable that the new law will be of much benefit to sole proprietorships or self-employed professionals given the inherent liability under those firms.
Those attorneys with nonprofessional clients likewise should discuss the new law with their clients. It is important to keep in mind that the new limitation of individual professional liability must be contractually agreed to. Therefore those clients negotiating with design professional firms should be ready to negotiate what may become a sticking point in the contract process. If the design professional firm insists on the inclusion of the individual professional immunity, then perhaps the firm would agree to certain concessions such as an increase in the overall liability cap for firm liability as a trade or perhaps a reduction in the overall contract price. Attorneys representing contractors intending to partner with design professional firms for design-build agreements likewise should carefully consider the impact of the new law on the liability exposure between the contractor and the design professional entity.
The aforementioned are just some of the issues that attorneys are likely to encounter as the new law takes effect and then eventually when the new law is litigated.
The text of the bill can be reviewed at http://laws.flrules.org/files/Ch_2013_028.pdf.
Keith Ramsey is an associate and Monte Starr is a partner in Holland & Knight's Orlando, Fla., office.
James K. "Keith" Ramsey
200 South Orange Avenue
Suite 2600
Orlando, FL 32801
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The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
Copyright 2013, ConstructionRisk, LLC
Article 3
Arbitration Award Does Not Establish Collateral Estoppel for a Non-Party
See similar articles: Arbitration | Collateral Estoppel
An arbitration decision in a case between an Owner/developer and its construction contractor did not create collateral estoppel that would bar the developer from seeking to recover damages from its architectural firm in a separate, later action in court. Arbitration was mandated in the contract between the owner and contractor, but did not include claims by or against the Architect, whose contract specified litigation for resolving disputes between them. As explained by the court, the doctrine of collateral estoppel precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding that was decided against that party regardless of whether the tribunals or causes of action are the same.
Only if the issue is actually litigated and squarely addressed, however, will the doctrine apply. Where the contract between the owner and architects was separate from the contract with the construction contractor, and different duties and obligations existed, the court found the owner failed to establish that the issues of breach of contract and professional malpractice had actually been litigated and squarely addressed in the prior arbitration proceeding. Crystal Clear Development v. Devon Architects, 949 NYS 2d 398 (2012).
Comment: This case is a good reminder of the importance of having consistency in how disputes on a project will be resolved. Either all by arbitration or all by litigation may be preferred in order that related issues between related parties can all be resolved at one time in a single forum and have a binding effect on all concerned. The contracts can be further refined to state that there will be “joinder” and “consolidation” of parties and issues into a single resolution process.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 15, No. 6 (June 2013).
Copyright 2013, ConstructionRisk, LLC
Article 4
Subcontractor’s CGL Insurance Carrier Owed No Duty to Defend Suit against Prime Contractor Where Allegations Concerned Economic Losses Claimed from Prime Contractor Construction Defects
See similar articles: Insurance - Additional Insured | Insurance - Duty to Defend | Subrogation
Subrogation lawsuit by prime contractor’s CGL insurance carrier against Subcontractor’s CGL carrier for failing to defend the prime was properly dismissed on summary judgment because “no conceivable interpretation of the complaints in the lawsuits at issue here could have triggered Hartford’s obligations under its policy with its insured.” A condominium developer sued its contractor alleging breach of contract by failing to provide defect-free work, and as a result, water damage occurred which required repair. The contractor tendered its defense to Hartford, the elevator subcontractor’s CGL carrier. In declining the tender, Hartford stated “The claims … involve economic loss arising our of a breach of agreement and inadequate design and construction. The damages are not ‘property damage’ or ‘bodily injury,’ nor are the damages he result of an ‘occurrence’ as defined by the Policy.”
Focusing just on what was included in the complaint’s allegations, the court found the complaint made no reference to any act or omission of the elevator subcontractor but instead alleged damages in the installation of vinyl siding, roofing, flashing, windows, and landscaping, none of which were the responsibility of the subcontractor. In highly critical terms, finding no duty to defend the prime contractor against the allegations, the court stated:
“The reading that Oregon Mutual urges us to adopt-that general allegations of water damage and construction defects implicates Otis’s elevator installation – lies beyond the range of conceivable reasonable interpretations and is simply speculative…. More broadly, any complaint alleging defective performance of a construction contract, without more, would implicate the insurer for every entity providing labor or materials to the project. In short, Oregon Mutual’s interpretation is unreasonable, and we decline to accept it.” Wellman & Zuck v. Hartford Fire Insurance, 285 P.3d 892 (Wash 2012).
Comment: Differences in the broad duty to defend and the more limited duty to indemnify were well explained by the court. It explained: “An insurance company’s duty to defend, which is broader than the duty to indemnify, arises at the time an action is first brought, and is based on the potential for liability. A lawsuit triggers the duty to defend if the complaint against an insured alleges facts that could, if proven, impose liability upon the insured within the policy’s coverage. With two exceptions not applicable here, the duty to defend must be determined from the complaint…. [I]f the insurance policy conceivably covers the allegations in the complaint, an insurer must defend the lawsuit.”
Language of additional insured endorsements are important when it comes to determining what duty a carrier has to the additional insured. From the discussion in the decision here it is apparent that the coverage provided was limited to property damage and bodily injury caused by the named insured for which the additional insured might have vicarious liability. The endorsement was not so broad as to provide coverage for economic losses. Nor would it even have provided coverage for property damage and bodily injury caused by anyone other than Otis Elevator, the Named Insured under the Hartford CGL policy.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 15, No. 6 (June 2013).
Copyright 2013, ConstructionRisk, LLC
Article 5
No Statutory Immunity for Engineer as Agent/Employee of City where Contractor Sued It for Tortious Interference with Contract and Negligence
See similar articles: Government contractor defense | Immunity | Independent Contractor | Statutory Immunity
The engineering firm, Arcadis U.S., and several of its employees, asked the court to dismiss a contractor lawsuit against them on the basis that they were immune from suit because they were acting as agents or employees of the City government when making decisions impacting the contractor. It was held that the immunity was not available to the engineer because it performed its services as an independent contractor rather than as an employee of the City. Trucco Construction v. Arcadis U.S., 2013 WL 494353 (Ohio 2013).
Allegations by the contractor who was building a water reservoir for the City of Freemont, Ohio, included assertions that the project was to be a “balanced site” and there would be sufficient clay on site to build the reservoir with minimal waste materials to be removed from the site. It further alleged that the engineer concealed the necessity for either using imported clay, a liner, or mixing existing soils with a soil sealer. In addition, the contractor alleged that when it submitted a change order request, the engineer consulted with the City on its draft responses and failed to act as an independent neutral party to resolve the issues as required by contract.
The immunity statute in question provides that “a political subdivision is not liable in damages in a civil action … allegedly caused by any act or omission of the political subdivision or an employee of the political subdivision in connection with a governmental or propriety function.” A definition of “employee” is specified in the statute and concludes with the following sentence: “Employee” does not include an independent contractor.”
Key to resolving whether the statutory immunity would apply to protect the engineer was determining whether the engineer was acting as an “employee” of the City in that it was performing all its duties within the scope of its contract and for the benefit of the City. After reviewing numerous court precedent decisions that found in favor of immunity in various circumstances, the court here stated that the determination of whether a party is an employee/agent or an independent contractor generally involves issues of fact for the trier of fact to determine, but where there is no conflicting evidence on the facts, the issue becomes a question of law that can be decided by the court on a motion.
In holding that the engineer was not entitled to immunity against the contractor suit under the statute, the court explained its reasoning as follows:
“The city of Fremont entered into a standard engineering contract with ACRADIS for the creation of plans and specifications to build a reservoir, supervision of the construction phase of the project, and a final inspection of the construction. Even though the contracts in this case provide that ARCADIS would act as the city of Fremont's representative during the construction phase, those provisions do not give rise to an agency or employment relationship. These provisions simply provide that the engineers would be the city's liaison with Trucco because the city of Fremont relied upon the professional skills of ARCADIS to ensure that the plans and specifications would be properly accomplished. For this reason, ARCADIS was named as a neutral party to interpret the requirements of the contract when disputes arose. There was no evidence presented that the city controlled any aspect of the work responsibilities of the individual appellant engineers. The engineers were selected and paid by ARCADIS and it controlled their work. Therefore, we find ARCADIS and its engineers cannot qualify as employees/agents of the city of Fremont for purposes of being afforded immunity under R.C. 2744.01(B). Appellants' sole assignment of error is found not well-taken.”
Comment: Ability to assert the right to immunity pursuant to statutory protections afforded to cities and governmental entities is an important legal defense and risk management tool. To the extent this defense might be available by law under circumstances that a court might find more favorable than was the case herein, it is important that the parties not agree by contract to waive their right to the immunity. Such contractually mandated waiver, however, seems to be getting more common. If an engineer or contractor is performing services and work within the scope of their contract with the government and for the benefit of the government, and there is statutory immunity available to them, I believe their right to assert the benefits of such immunity should be preserved and encouraged. If the government were doing the services and work with their own staff, they could not be sued because the immunity statute would protect them.
Why should it be any different when the services and work are performed by an engineer or contractor? Allowing immunity protection would logically decrease the risk profile by eliminating lawsuits and reducing insurance premiums. It would result in greater completion and better pricing for the benefit of the government. No significant harm would occur to a party (such as the contractor herein) that may be barred by the immunity statute from suing an engineer since the contractor would still have its normal legal remedies against the project owner with whom it contracted. To the extent the contractor recovers from the project owner, the Owner might have its own potential cause of action against the engineer, depending upon the facts of the case and the law.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 15, No. 6 (June 2013).
Copyright 2013, ConstructionRisk, LLC
Article 6
Terminated Contractor Cannot Sue Architect for Tortious Interference with Contract
See similar articles: Default Termination | tortious interference
Summary Judgment must be granted to Architect against Contractor’s suit that claimed Architect tortuously interfered with its contract by recommending that the project owner terminate the contractor for default. The architect based its recommendation on what it observed as well as on Owner’s construction manager conclusions and those of an independent consultant brought in by the Owner as a third party neutral to evaluate the project. The CM expressed concerns about “lack of progress,” “general disregard of accepted construction means and methods,” and “willful violations of the law as the approved project plans and specifications.” The project neutral issued a report concluding that the contractor failed to perform in accordance with the terms of the contract and failed to provide a schedule that satisfied “even the most rudimentary requirements of the contract documents” and neglected to give adequate attention to certain issues and failed to maintain an adequate workforce, among other problems. The court found that in light of the documented concerns and critical analysis of the contractor’s work, the contractor could not even establish that “but for” the architect’s conduct, it would not have been declared in default by the Town. In addition, as explained in the balance of this article, the court concluded that the Architect acted within the scope of its contract, and the contractor didn’t prove the Architect acted with malice. For these reasons the court reversed the trial court and held that summary judgment should have been granted to dismiss the contractor’s complaint. Schmidt & Schmidt v. Town of Charlton, 103 A.D.3d 1011 (2013).
This case has an interesting history. On an earlier motion to dismiss the contractor’s suit, the trial court granted the motion. This was reversed by the appellate court, holding that the contractor’s allegations, liberally construed, were sufficient to survive the motion to dismiss for failure to state a claim. After the architect conducted discovery and came back to the court with a motion for summary judgment, the court found the contractor failed to “come forward with sufficient admissible proof to raise a genuine question of fact” to be decided at trial. Thus, the appellate court held that the trial court should have granted summary judgment.
As explained by the court, the tort of tortious interference “is not satisfied by conduct that is merely negligent or incidental to some other, lawful, purpose.” Rather, “the plaintiff must establish that the defendant’s procurement of the alleged breach as solely malicious.” Here, the architect was acting as agent of the owner within the scope of its contract for professional services. Quoting from court precedent, the court explained, “where, as here, an agent [Architect] is alleged to have induced its principal [Project Owner] to breach a contract, the agent cannot be found liable unless it does not act in good faith and commits independent torts or predatory acts directed at another for personal pecuniary gain.”
In this case, the court found that the contractor failed to have admissible proof of any of these necessary elements needed to prove tortious interference.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 15, No. 6 (June 2013).
Copyright 2013, ConstructionRisk, LLC
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